A rational look at the law, economics, and other salient issues of the day.

Wednesday, February 22, 2006

Dubai Ports World Deal

We discussed this story in my national security class this week. At the time I sat silently in class because I was unsure how to react. There are two questions that I have regarding a United Arab Emirates-owned firm owning the port operating rights in several US coastal cities.

First, who will be making decisions on the ground? It is silly to assume that a whole bunch of UAE citizens will be getting shipped over to control the docks in these cities. It will likely be many of the same employees, US citizens, staffing these jobs. As with anything else, the owners will be making the decisions. The UAE higher-ups have alot of economic interest on the line, and no known ties to terrorism.

Second is the foreign investment issue. Alexander Hamilton, as our nation's first Treasury Secretary, posited that investment in a government is likely to keep loyalty intact. He believed that the economic stakeholders in a nation are unlikely to wage a war against the same because they've already put their assets into the success of that nation (of course this transaction is a private one, but is still analogous).

The indelible conclusion that I must reach is that whether a British outfit, a UAE outfit, or an American outfit runs these ports, the government oversight/inspections/rule-making should be firmly in place. I don't believe Congress should attempt to keep a foreign company (from any nation not openly and officially hostile toward the U.S.) out of industry. I will stop short of stating unqualifiedly that the UAE is our friend forever. Yet I think there are better, more effective controls to be levied against whichever company takes control. Despite what the conspiracists may say, the premise--that any Middle East-owned company is likely to blast America through ports that it owns and operates--is without support.

In the wake of the failed CNOOC-Chevron deal last year, foreign investors will at some point rebuff large-scale US investment. This is an unacceptable result in the present climate, where such investment has been an integral part of our recovery over the last 18 months.

Update: The DPA has suggested forming an American Corporation in order to structure the deal.